Monday, 11 December 2017

Business and circuses

The early invitation by May for Trump to make a State Visit to the UK looked pretty silly at the time.  The more time passes, the more reason he gives people for demanding that it be cancelled.  If I thought that anything he said was thought out before he pressed finger to keyboard, I’d almost be tempted to suggest that it was entirely deliberate – he wants it to be cancelled.  Not only would that spare him the prospect of protests against his presence, it would also fuel his claim to be willing to stand up for America in the light of all criticism.
It seems unlikely that the invitation will actually be rescinded, though.  It’s more likely to sit behind the clock on the White House mantelpiece gathering dust in the vain hope that all concerned will simply forget about it.  The UK Government responds to every call for the visit to be cancelled with a resounding ‘no’.  Whether the messages being delivered privately by diplomats are any different is another question, but I doubt it for two reasons.  The first is that if any different message had been passed on quietly, Trump would surely have tweeted about it.  He struggles to keep quiet about anything, and certainly not any suggestion of a slight to himself.  And secondly, there is the long history of the UK according official state visits to a succession of tyrants, dictators, and crooks.
There are reasons aplenty to withdraw Trump’s invite; I don’t think I even need to spell them out.  But can it really be said that he is a less worthy invitee than many of those already on the list?  Turning the issue into a question of whether or not one person should come is to avoid the real underlying issue, which is the willingness of the UK state to welcome all manner of undesirables to these shores in the hope of economic advantage, lavishing them with honour in the process.  The best way to stop Trump’s visit is to abolish the whole business of state visits, which are anachronistic and irrelevant, a throwback to a Ruritanian past.
Economically and politically, we have little choice but to deal with the world as it is, and that sometimes means dealing with some very unpleasant people whose values few of us share.  But we don’t have to fete them in the process.

Friday, 8 December 2017

Progress?

Today’s news about an apparent ‘breakthrough’ in talks over Brexit is better than many of us had expected, although whether it’s much more than a form of words to enable the next stage to commence remains to be seen.  The wording looks like a bit of a fudge; something which can be interpreted in more than one way in order to satisfy multiple audiences, but which will need to become a lot clearer than that over the coming months.
The statement that "the UK will maintain full alignment with those rules of the Internal Market and the Customs Union which, now or in the future, support North-South cooperation, the all island economy and the protection of the 1998 Agreement” seems to avoid both a hard border across Ireland and the imposition of a hard border in the middle of the Irish Sea, but the devil will be lurking, as ever, in the detail.  How will they determine which areas of ‘alignment’ are the ones which support ‘North-South co-operation’, for instance? 
There was talk, in advance, of effectively remaining in the single market for some sectors but not others, but regulating that produces immense challenges.  It could mean, for example, that lorries containing agricultural produce will flow freely but those containing widgets won’t.  It doesn’t take a genius to work out that the implication of that is that those claiming to be carrying meat might just need to be checked to make sure that there are no hidden widgets – which brings us straight back to the hard border issue.  The simple, practical, cheap, and effective way of determining in which areas alignment should be maintained is not to bother – this agreement looks to me like the first step towards tearing up another of the government’s red lines and remaining in the single market.  It’ll take a few more months of drama and crisis to reach that point, though.
I thought that yesterday’s remarks by the Chancellor, that any suggestion Britain might walk away from talks without paying off its obligations to the EU was “not a credible scenario.  That is not the kind of country we are.  Frankly, it would not make us a credible partner for future international agreements” was one of his more sensible pronouncements.  The fact that he was so roundly ‘corrected’ by Number 10 within hours by a spokesperson for the Prime Minister saying that honouring our debts was “dependent on us forging that deep and special future relationship” makes it clear that reality is dawning on May only slowly, and only one step at a time.
The end state – something which the Cabinet have not even felt it necessary to discuss yet, apparently, probably because thy know that they won’t agree – looks increasingly like being membership of the single market and customs union, no independently-negotiated trade deals, a continuing role for the European Court of Justice, continuing payments to the EU’s funds, and acceptance of EU rules with no input to their drafting.  Brexit means anything but Brexit.  No wonder the Brexit ideologues are getting increasingly restless.

Thursday, 7 December 2017

Blaming the 'marginalised'

The offensiveness and insensitivity of the remarks made by the Chancellor to the Treasury Select Committee yesterday mean that an important point about the way in which productivity is measured and its importance to the economy is in danger of being lost in a barrage of wholly justified criticism of Hammond’s choice of words.  Describing the disabled as a marginal group in society was an open invitation for the attacks to concentrate on the man rather than the message.
Productivity is a simple enough concept at the level of any individual enterprise – it’s a mathematical calculation of output divided by input, or in practice the value of the goods or services produced divided by the number of hours worked by employees to produce that output.  That doesn’t necessarily match what many might think of though.  Certainly it means that ‘productivity’ can be increased if the same output can be produced with half the workforce; but it also means that ‘productivity’ can be increased by simply upping the price of the product, as long as the labour costs remain the same.  But does that really mean (in terms that most of us can relate to) that the workers have suddenly become more productive?
Using the same measure scaled up for the economy as a whole brings other problems.  Dividing the GDP of the UK by the number of hours worked by all employees of all organisations certainly provides a ready measure of something, and if all countries are measured in the same way, it provides a handy basis for comparison.  But it does also mean that an economy which adds lots of jobs at low pay rates for small increases in overall GDP will appear to be losing productivity compared to other economies which do not follow that path.  It doesn’t matter that the overall GDP of the country has increased, whether measured in absolute terms or in terms of GDP per head. 
On this measure, it doesn’t matter that there are more people in work and fewer on benefits; a measure of productivity per hour worked will react in the ‘wrong’ way to an increase in employment in jobs which only add marginally to overall GDP.  Note that – and this is why the Chancellor was so wrong in the way he made his remarks – it doesn’t matter who the people doing those jobs are; it’s not that the people doing the work are in marginal groups, it’s the low-paid low-output nature of the jobs which are being created which is the problem. 
More important still is how we respond to the situation.  If productivity as currently measured is the prime driver, then it could actually be improved by closing down marginal enterprises, and cutting the numbers employed in the less marginal enterprises.  Total GDP would fall, and GDP per head in the economy would fall, but ‘productivity’ would apparently increase.  That merely underlines the fact that ‘productivity’ as currently measured is a poor tool for judging overall economic success.  None of that means that the low level of productivity in the UK economy compared to others isn’t a problem.  It means, rather, that we need to look at what else can be done to improve the situation, rather than blaming marginal groups or even marginal enterprises.  It's a question about what sort of economy we want.
We could start by looking at the performance of those companies which are sitting on large sums of cash rather then investing them.  I’m sure that some of them would argue that the uncertainty caused by Brexit is a reason to hold back on investment.  They’d be right up to a point – but this is a phenomenon which long preceded Brexit.  It’s a failure of capitalism to serve the needs of the community as a whole rather than the greed of the few.  But it’s much easier for a Tory Chancellor to blame those he regards as ‘marginal’ than to look a lot closer to home.

Wednesday, 6 December 2017

Border myopia

I don’t really expect ministers of the Crown to understand the entirety of their briefs; that would be too much for people who are generally little more than political figureheads.  So the fact that one former Northern Ireland Secretary, Owen Patterson, managed to get his figures wrong in relation to cross-border trade is probably just the result of him being a ‘former’ minister and no longer having civil servants loyally hanging around ready to ‘clarify’ what he really meant.  The point that he was trying to make, as I understood it, was that because trade levels are so low, the existence of – or nature of – a border really isn’t that important.
Much more worrying than his lack of grasp of the figures is that a spell in the Northern Ireland office has done nothing to open his eyes to the fact that borders are about more than trade and economics.  There are few borders, anywhere in the world, which are as highly charged as that on the island of Ireland, and the fact that he still thinks it’s all about trade shows the power of a financial-based ideology to blind its holders to all other factors.
It does, though, provide a good insight into all that’s gone wrong with the Brexit process and negotiations from the outset.  Other borders within Europe may not be as sensitive as that between the Republic and the North, but the continental approach to borders and the European project has always been imbued with a significance which goes well beyond trade and economics.  The UK position, on the other hand, has always been driven by the ideologues who see humans as little more than economic animals, driven solely by pursuit of their own best financial interest, at the expense of others whenever necessary.
It is the same blindness to the non-economic factors which led the Brexiteers to tell us that German carmakers, backed up by Italian Prosecco producers, would force Merkel and the others to give us a better deal outside the EU than we get inside.  It was that attitude which led to talk of the deal being the “easiest in human history” (© Liam Fox).  And it was that attitude which led to the “they need us more than we need them” approach to the possession and consumption of cake.
But if a spell presiding over the Northern Ireland office, dealing with one of the most emotionally-charged borders in the world, can’t reduce this myopia, then what can?  After the events of this week, I suspect that the answer is ‘nothing’.  The gulf in perception of what opening borders is about remains as great – perhaps even greater – now than it was at the outset.  And one of the worst aspects of all of this is that I see little by way of a better understanding on the opposition benches.  The opposition parties seem almost as fixated by the economics as the government.

Tuesday, 5 December 2017

Accidentally cancelling Brexit?

Unsurprisingly, the Brexit fanatics are taking their ire out on the Republic of Ireland over the issue of a border across the island.  For those who have never really understood, let alone accepted, the idea that the Republic is an independent state rather than still part of, or a vassal to, the UK, this is only to be expected.  It overlooks the fact, however, that there is a sense in which what is being presented as an ‘Irish problem’ is only the specific and obvious example of what is in fact a generic issue.  That issue is, as Ian Dunt puts it here, that a divergence of regulatory regimes means that “you need to check that goods and services are of the required regulatory standard, that the correct tariffs have been paid and that products originated where they say they have”.  It only looks like a specific ‘Irish’ problem because it’s only in Ireland that there is a land border between the EU and the UK.
The solution proposed by May, guaranteeing no regulatory divergence between the North and the Republic, is a neat solution to the specific, but it does nothing to resolve the generic.  It merely shifts the issue from a line drawn across an island to a line drawn in the sea – it is the Brexiteers’ desire to opt out of the EU regulatory regime which causes the problem, not the Irish Government.  The only thing surprising about the opposition of the DUP to anything which effectively puts the North outside the UK regulatory regime – which is the apparently inevitable consequence of what the proposed agreement said – is that it did, indeed, seem to come as a surprise to May.
The call from Scotland, Wales and London to be given the same deal as Northern Ireland makes eminent sense politically.  As Nicola Sturgeon put it, “If one part of UK can retain regulatory alignment with EU and effectively stay in the single market (which is the right solution for Northern Ireland) there is surely no good practical reason why others can’t.”  Whilst I wholly agree with the sentiment, I don’t agree with the bit about there being ‘no good practical reason’.  For the reasons referred to above, putting Wales or Scotland in a different regulatory regime from that operating in England requires borders between those countries; and doing the same for London requires a border around that city.  Theresa May – or any other UK Prime Minister – is not going to ‘solve’ the problem of the Irish border by creating three new borders within the island of Great Britain.
There was one phrase in the proposed agreement which has received scant attention, and that was that the continued regulatory alignment would happen only "in the absence of agreed solutions".  I’m sure that May thought that would be enough of a fudge to be able to move on to the next phase, during which she and her team still fondly believe that they can negotiate a deal which gives the UK all the advantages of, and access to, the single market without being a member.  If they could pull that off, then of course the deal that she almost agreed to yesterday would become irrelevant; there would be no need for a border at all.  It would probably signal the end of the single market and possibly the EU itself (why would anyone want to remain a member if they can get as good a deal outside?) and for that reason alone it won’t happen.
There is, though, one other way in which May could honour the agreement she so nearly made yesterday, and that is to retain regulatory alignment with the EU for the whole of the UK – to remain a member of the single market and the customs union, cancelling Brexit "in all but name".  Did she effectively, albeit accidentally, come close to committing to that yesterday?

Monday, 4 December 2017

That, apparently, is not what he meant...

I’m not exactly the biggest fan of the idea of designating a particular city as the Capital of Culture for a period.  It does seem to bring some economic benefits to the areas concerned, but I wonder how long-lived they are, and how well - and fairly - the benefits are spread amongst the wider community.  I suspect that there might be other ways of spending the same amount of money for better outcomes.  Whatever, the competitions exist, and as long as they do, I cannot fault those cities which do their best to get whatever investment is available, from whatever source.
One of the competitions is the ‘European Capitals of Culture’ Programme.  It’s run by the EU and the funding comes from the EU’s budget, but is not only open to EU countries; it is also open to EEA/EFTA countries, as well as candidate and potential candidate EU members.  And it was supposed to be the UK’s turn to have one of its cities nominated for 2023 under the rules of the scheme.  However, the EU Commission has, not at all surprisingly, pointed out that after March 2019, as a result of the Brexit referendum and the government’s hard line decision to refuse membership of the EEA/EFTA as well as of the EU, the country will no longer fall into any of the eligible categories, and cannot therefore nominate a city for 2023. 
It’s an entirely reasonable and logical conclusion – unless you’re a Brexiteer, in which case it is “a pathetically childish act” according to Leave.EU, and has been described by various commenters as an example of the EU’s bullying approach, or another reason why the UK is right to leave.   Even Nigel Farage is apparently sad about it.  Yes, that’s right – people who think we should walk away without paying a penny more into EU funds really are arguing that the funds to which we are no longer contributing (and this funding would come after the period covered by the misnamed divorce bill) should still be available to the UK.  Or even that the fact that the funds to which we currently have no commitment and to which we will not be contributing are not available to us is a good reason or not paying for anything to which we have committed.
As one of the more rational commenters put it: “Don't think you quite understand how this Brexit thing works do ya?”.  But then, who can be bothered with mere facts?

Wednesday, 29 November 2017

Delusion and reality

One of the problems from which the delusional often suffer is that the real world has a tendency to intervene, and can’t always simply be imagined away. For Brexiteers, the hard reality that they are not going to persuade anyone to give them any new concessions by threatening to simply renege on existing financial obligations has been a long time coming, but there does seem to be an inkling of progress towards a more realistic position.  It’s not agreed yet, of course, and we don’t yet know the final figure.  It will almost certainly be higher than the headline figure being quoted, but a bit of skilful negotiation on both sides might be enough to hide the final total in a plethora of rebates, discounts and conditional payments.
There has also been talk for a while about progress on protecting the rights of EU citizens.  If it weren’t for the innate dislike that some people seem to have of all foreigners, this should have been the easiest of all to resolve.  All they ever had to do was to extend the rights of UK citizens to match those of EU citizens.  Again, progress has been hindered by an unwillingness to give the citizens of the UK more rights.  I think it’s called ‘taking back control’.
That leaves the one that the UK imperialists always thought was going to be the easiest of all to settle, and that’s the question of the border with the Republic of Ireland.  There was never any rational basis for assuming that it would be easy, but a failure to understand that the republic is an independent state, with full membership rights of the EU, rather than some sort of vassal state of the UK has blinded them to the fact that the EU 27 were always going to be more likely to unite behind a loyal continuing member than to abandon that member's interests in pursuit of a deal with a troublesome departing member.  The treatment being meted out to Ireland by some sections of the press well displays the lingering imperialism and exceptionalism which has dogged the UK for generations.
In purely logical terms, I have some sympathy with the position adopted by Liam Fox, which is that the nature of the border required depends on the nature of the trade deal between the EU and the UK, and might therefore be better dealt with in phase 2.  Or rather, I would have more sympathy if the UK government had not, during phase 1, removed from the table all the practical options which would allow an open border to continue, demanding instead that the EU come up with a proposal to avoid the logical consequences of Brexit for the border.
The key word there is practical, and how it is interpreted.  It has long been clear that the real objective of the Brexiteer ideologues isn’t simply to remove the UK from the EU, it is to abolish the EU and replace it with a purely economic relationship based entirely on trade.  How else can anyone interpret the demand for a trade agreement as good – or better – that the one we have, but without membership of the single market or the customs union?  Now if somebody believes – as I suspect that Fox does – that Brexit is just the first step towards that goal, and that the UK crashing out with no agreement on a future relationship will help to bring that about, then the position being adopted actually makes some sort of sense.  But to repeat the opening line, one of the problems from which the delusional often suffer is that the real world has a tendency to intervene, and can’t always simply be imagined away.

Monday, 27 November 2017

Truth and political advantage

A few days ago, one of the Chancellor’s aides insisted that the much-criticised pledge to provide an extra £350 million a week to the NHS could in fact be met after the UK leaves the EU.  The idea received support from Glyn Davies, the MP for Montgomeryshire, who argued that making that cash available “would totally undermine the most continuing bone of contention”, and by implication the arguments of those of us who feel that the electorate were misled into voting to leave the UK.  I think that they’re both right – it can be done, and it would alleviate a running sore.  But being right isn’t the same as being honest; such a move would be, if anything, even more dishonest than the original pledge.
Firstly, the amount available as a result of leaving the EU isn’t the £350 million a week that is quoted.  It is well-established that that is the gross figure before the UK’s discount.  The net amount is more like £250 million.  So around £100 million needs to be immediately deducted from the claimed £350 million.
Secondly, however, we even get some of that lower figure back for things such as payments to farmers and the development funding which Wales receives.  Any suggestion that the money going to the NHS would be the ‘same’ money which is currently being sent to the EU implicitly assumes that the UK Government would simply cancel all payments to farmers and all regional aid.  If that is not what is being proposed (and I’m fairly sure that it isn’t), then these payments need to be deducted from that £350 million as well.
Thirdly, some of the money which we don’t get back goes on what some like to call the ‘Brussels Eurocrats’.  Now, of course we won’t need to pay for them any more, will we? No, we won’t; but neither can we simply assume that none of them add any value to anything and that we can simply do without them.  The UK will need to employ its own trade negotiators instead of those eurocrats, it will need more staff to deal with customs and borders; it will need its own people to take on all the tasks currently performed collectively by the EU.  Any honest assessment of the amount available for the NHS after Brexit has to deduct all these costs from that infamous £350 million.
Fourthly, there is the misnamed and misunderstood ‘divorce bill’.  In reality, this isn’t a cost of leaving, but a payment of sums to which the UK has already committed.  Whatever the final sum paid (and we don’t know that yet), it amounts to a continuation of part of the membership payments for an agreed period.  It’s the same money, and therefore needs to be deducted from the £350 million a week.
Finally, there is the hardest and vaguest question of all – what is the impact of Brexit on the UK economy and therefore on tax receipts at the Treasury?  This is, ultimately, a matter of opinion and assumption rather than unassailable fact.  If the Brexiteers are right, then in the long term, the benefit to the UK economy will be so great that it will fill the entire gap that I’ve outlined above, with lots of lovely money to spare.  And if they’re wrong, then the reduction in revenues as a result of Brexit also needs to be deducted from that mythical £350 million.  Who’s right?  In the short term, I, like most others, believe that the UK economy will take a hit.  And to the extent that that is true, the amount of that loss in revenue also needs to be deducted from the so-called Brexit bonus, before we can begin to allocate that money to the NHS or anything else.  (In the longer term, I’m less certain – I’ve argued before that I’d have had more time for the Brexiteers’ arguments if they’d been upfront and admitted that there’d be some short term pain for an anticipated longer term gain, but arguing that there would be an immediate gain was always an outright lie.)
So, given that the £350 million a week doesn’t stand up to any sort of objective examination, how can I say that Kwasi Kwarteng is right to argue that the UK Government could decide to put an extra £350 million a week into the NHS after Brexit?  Simply because that decision actually has nothing at all to do with Brexit.  Austerity and debt reduction are political choices, not economic necessities, and the money could be made available by the simple expedient of making different political choices.  It’s ideology, not membership of the EU, which prevents investment in the NHS.  It’s ideology, not economic necessity, which prioritises cuts to services over any increase in taxes or borrowing. 
Presenting the possibility of a £350 million a week additional investment in the NHS as a consequence of Brexit is fundamentally dishonest.  That won’t necessarily stop them doing it, of course.  But I rather suspect that ideology will continue to blind them even to the obvious political advantages of simply adding another big lie to the ones already told.

Wednesday, 22 November 2017

Debating the tax bill

There is nothing at all unreasonable about a departing member of any organization arguing about the legal basis on which outstanding debts should be settled.  Money is either owed or it isn’t, and there is little doubt in my mind that the EU27 have a reasonable basis for demanding that the UK meet the obligations to which the country has committed.  I’m equally clear that the UK can, if it wishes – and this is what the extreme Brexiteers are saying, simply renege on previously-made commitments and walk away, although I don’t share their optimism that those left with a hole in their budgets will simply shrug their shoulders and place their trust in any commitments that the UK Government makes in the future.
I doubt, though, that many of us would find our banks terribly understanding if we went to them and said, in effect, “We’ll offer to pay you part of what we previously committed to pay you, but only on condition that you allow us to dictate the terms under which we’ll bank with you in future”.  That, though, seems to be roughly the position of the UK Government in relation to settling debts with the EU.  In fairness, it is an approach that most of the extremely wealthy individuals and the biggest multinational companies would recognise, because it is precisely the approach which the UK Government adopts when it comes to taxing the rich and powerful.  They are allowed to pluck a figure out of the air, negotiate around it and arrive at a settlement under which they pay as much as they agree to pay, regardless of their actual tax liability, basically because that makes things easier for HMRC than having to go through all the bother of making a proper assessment.  So I can see why ministers might believe that it can work, although I’m far from certain that the EU27 will roll over as easily as HM Treasury does.
Underlying all this is that, instead of trying to debate and agree what the UK actually owes by considering the elements of the ‘bill’ carefully and reasonably, the UK government – egged on by a media which has little interest in facts or details – is obsessing over the total sum, and trying to create a spurious link between meeting agreed obligations on the one hand and demanding favourable future treatment on the other.  And they wonder why the EU27 are losing patience with them.

Monday, 20 November 2017

Latest update from Planet Zog

I thought that David Davis was simply making an attempt to re-affirm his extra-planetary origins in his speech last week.  The BBC’s Europe Editor saw it as evidence that the two sides were inhabiting “parallel universes”, but EU chief Donald Tusk dismissed it as simply an example of the “English sense of humour”.  It’s a kindness of approach which the UK Government has done little to deserve.  In the course of the speech, the Secretary of State for Exiting the EU gave us his latest take on the state of talks.  It was full of absolute gems:
·       The minister charged with ending the UK’s existing membership of the world’s most successful free trade area declared that he wants the “freest possible trade in goods and services”, and even that the UK’s current close economic ties “should continue, if not strengthen” after the UK breaks those ties.  Yes, he really is arguing that the ties with a non-member can be stronger than those amongst members.
·       The same minister, who is also charged with implementing the political decision to leave the EU, strongly warned the EU against “putting politics above prosperity”, because, after all, "Putting politics above prosperity is never a smart choice".   An understanding of irony is clearly in short supply on Zog.
·       With his responsibility for ending the over-regulation for which he and his team have been blaming the EU for decades, he made it clear that he wants the UK to lead a "race to the top on quality and standards" rather than engage in a "race to the bottom" that would mean lower standards.  Adding more regulation and standards is now better than abolishing them, apparently.
·       To complete his full house of demands for everything to change whilst everything stays the same, he went on to say that being able to resolve disputes without being subject to the rulings of a supranational body like the EU Court of Justice would require the creation of a supranational body to whose rulings both the UK and the EU would both be subject.
There is, of course, a very simple and obvious way in which he and the UK Government can have all that they claim to want here, but that is simply not the way that things are done on his home planet.